Global professional services firm KPMG has sounded a warning over significant gaps, errors, inconsistencies and omissions in Nigeria’s newly enacted tax framework, saying the issues could undermine the ambitious tax reform objectives and potentially deter investment, spur disputes and threaten economic growth.
In its latest newsletter titled “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions,” KPMG acknowledged the potential of the new legislation to transform tax administration and increase government revenue — but stressed that urgent revisions are needed to ensure that the laws deliver on their intended goals.
The new tax framework, which includes the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), and related laws, came into effect from 1 January 2026 as part of a broad reform aimed at simplifying tax administration, boosting revenue, and enhancing competitiveness.
Among the principal concerns highlighted by the firm:
• Ambiguity in Taxation of Non-Residents
KPMG said the law lacks clarity on whether non-resident entities with no Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria should be required to register and file tax returns. While withholding tax may be treated as final tax, the absence of explicit exemption from registration obligations could create compliance confusion and unnecessary burdens for foreign entities.
• Unclear Treatment of Foreign Dividends
Under Section 6(2) of the NTA, KPMG noted that foreign-sourced dividends may be taxed differently from dividends paid by Nigerian companies, potentially resulting in double taxation and uneven treatment of investors.
• Undefined Position on Capital Losses
The firm pointed out that the Act does not clearly state whether capital losses — outside digital or virtual assets — are deductible when computing total profits, creating scope for disputes with tax authorities.
• Restrictions on Foreign Exchange Deductions
Section 20(4) limits deductions on expenses incurred in foreign currency to the official Central Bank of Nigeria (CBN) exchange rate, excluding additional costs businesses pay on the parallel market. KPMG said this rule fails to consider current foreign exchange supply challenges and urged that actual costs be recognised for deductions, provided adequate documentation.
• VAT-Linked Deductions and Other Disallowances
The report criticised provisions that disallow deduction of expenses where VAT was not charged, insisting that any business expense wholly, exclusively and necessarily incurred should be deductible.
• Personal Income Tax Concerns
KPMG also queried certain individual tax provisions, including limited allowable deductions and low rent relief thresholds, warning such measures could be viewed as oppressive and jeopardise voluntary compliance.
• Community Taxation Ambiguity
Section 3 of the NTA lists taxable persons but omits “community,” although it appears in the law’s definitions. This omission could lead to uncertainty over whether communities are liable for tax under the new regime.
Analysts have raised concerns that unresolved ambiguities could result in costly litigation between taxpayers and the Nigeria Revenue Service (NRS). There are fears that unclear provisions on deductions, foreign dividends and capital gains could discourage investment and trigger capital flight, particularly among high-net-worth individuals and multinational companies.
The issues come at a time when the Federal Government has already signalled significant fiscal adjustments, including a reduction in the corporate income tax rate from 30% to 25% for 2026, with authorities seeking to balance tax competitiveness with revenue needs.
KPMG urged the Federal Government to:
• Review and amend ambiguous provisions in key sections of the NTA and NTAA.
• Harmonise the tax legislation with international best practices, especially regarding non-resident taxation and double taxation treaties.
• Strengthen international cooperation, capacity-building and information sharing for effective tax administration.
For businesses, the firm recommended conducting comprehensive impact assessments, upgrading ERP and payroll systems to align with the new laws, and investing in training and documentation to mitigate risks during audits or compliance reviews.
While Nigeria’s tax overhaul represents a bold attempt to modernise and simplify the country’s tax system, critics argue that clarity, precision and consistency are essential for its success. As policymakers and stakeholders engage with the feedback, the coming months will be crucial in determining whether the reforms will strengthen Nigeria’s economic competitiveness or inadvertently create friction in the business environment.
